New Livestock Rules Mean the USDA is No Longer Big Meat's BFF

USDA secretary Tom Vilsack's proposed new antitrust meat regulations mark the decline of a long, loving and productive relationship between the USDA and Big Meat. While the agency isn't actually abandoning companies like Tyson (TSN), Smithfield (SFD) and Brazilian company JBS, it has clearly decided that it's time to move on and make some new friends, namely smaller and independent farmers and ranchers that have, for decades, been struggling to survive.

The new rules, which Vilsack dubbed "aggressive," are a stab at leveling the playing field in an industry that's dominated by a handful of corporate giants. Four companies -- JBS, Tyson, Cargill and National Beef Packing (NBP) -- slaughter 83% of the cattle consumed in the US, and some 60% of the chicken market is controlled by Tyson, Perdue and Pilgrim's Pride (PPC), which is majority-owned by JBS.

It's no secret that, over the years, executives at these companies have had the sympathetic ear of USDA officials (and some of them became USDA officials). Most USDA policy over the past 30 years has been about making sure that big agricultural companies are able to do their job of supplying America with an incredibly cheap and reliable stream of food. It was the now-unthinkable food shortages of the 70's that promoted Nixon's agriculture secretary Earl Butz to issue the infamous mandate that farmers "Get big or get out."

Now, at Obama's USDA, big is not always best. For the first time in modern history, an agriculture secretary is pursuing an agenda designed to help the little guys, whose numbers are shrinking and who are getting paid dramatically less for their animals than they did three decades ago. According to the USDA, a hog farmer today is paid half of what they would have received for the same meat 30 years ago. And cattle farmers receive 43% of the retail value of a steer, compared with 62% in 1980.

Here's what the proposed, power-shifting rules, which will be open for comment for several months before they are finalized, will do:

Make it easier for small farmers and producers to sue big processors for unfair practices

Prevent cattle and hog buyers from paying more to big producers than they do to small ones.

Require chicken processors to give their independent contract growers at least a 90-day notice before suspending chick deliveries. Under the current system, companies can stop dropping off baby chickens any time they want, leaving farmers with empty, unproductive chicken houses.

Require chicken processors to publish their contracts with growers

Prevent processors from forcing farmers to take on additional debt for equipment or chicken house upgrades unless it's guaranteed that the farmers will recoup 80% of the cost.

As you might image, large meat companies are not happy with the USDA's new affection for small farmers. Mark Dopp, policy director for the American Meat Institute, which represents mostly large beef packers and processors, called the rules an attempt to "roll back time." The group and the National Chicken Council, which represents poultry processors, are going to fight the new rules, possibly in court.